John Wood Group Shares Plummet Over 60% Following Write-Off Review
Shares of John Wood Group experienced a dramatic decline, dropping over 60% after the energy services firm announced an independent evaluation concerning a series of significant multimillion-dollar write-offs.
The London-listed company revealed that Deloitte is investigating the transactions in light of discussions with its auditor KPMG, a well-known Big Four accounting firm.
In its interim financial results released in August, the Aberdeen-based Wood recorded a $140 million write-down associated with its exit from large-scale engineering, procurement, and construction projects as part of a significant restructuring initiative.
This review aims to assess governance matters related to these decisions and determine whether any previously reported financial outcomes need to be amended. It will also investigate the status of contracts within the projects division, along with accounting practices and controls.
Ken Gilmartin, the chief executive officer of the group, stated that an update on the review process would be shared once it is completed, although no specific timeline was provided.
Earlier this year, Wood attracted acquisition interest from Sidara, a Dubai-based engineering consultancy, which valued the company at $1.6 billion but eventually retracted after conducting due diligence.
This marked the second consecutive year that Wood garnered interest, following Apollo, a private equity firm from the United States, which also withdrew from bidding despite previously valuing the company at $2.2 billion.
The substantial drop in share price saw the value plummet by 74p, resulting in a closing price of 49p and leaving the company with a market capitalization of £343 million.
This announcement coincided with the release of third-quarter results highlighting a decline in the company’s order book value from $6.1 billion in June to $5.4 billion by the end of September. This decrease was attributed to the timing of certain projects as well as challenges within the projects division, particularly in the minerals, chemicals, and life sciences sectors.
Gilmartin expressed optimism for an improved order book in the fourth quarter, noting, “We continue to secure outstanding, highly complex engineering and delivery work across our sectors.”
The company’s revenue for the third quarter showed a slight increase of 1% year-on-year, approaching $1.49 billion. For the first three quarters of 2024, Wood reported a 3% decline in revenue, totaling $4.3 billion, reflecting weaker results from the projects sector.
Adjusted earnings before interest, tax, depreciation, and amortization rose by 4% year-on-year for the period from January to September.
Gilmartin indicated that the company’s outlook for the year remains stable, projecting high single-digit growth in underlying profit while net debt levels are expected to remain flat following disposals.
Analysts at Morgan Stanley and Jefferies noted that while the company had previously anticipated generating substantial free cash flow in 2025, that forecast has been moderated according to its trading update.
Gilmartin acknowledged awareness of the challenges in the projects division but expressed confidence in the group’s improving cash trajectory. Further insights regarding cash generation are expected during Wood’s annual results announcement.
Wood employs over 36,000 individuals globally, engaging in engineering and operational activities across various sectors, including energy, minerals, net zero initiatives, and chemicals.
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